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After four consecutive quarters of y-o-y profit fall, the 86.7% jump in Sintex Industries' September quarter net profit was something that might have rekindled hopes of a turnaround for the company's investors.

This was reflected in the 5.7% jump in its share price with strong spurt in volumes post results. However, the scenario is not so clear. The company's challenges persist and it still appears a few quarters away from a real turnaround.

The main reason behind Sintex's profit jump was a 92% reduction in its forex losses to Rs 4.9 crore that boosted its pre-tax profits by Rs 55 crore compared with the year-ago period.

Excluding this, the pre-tax profits at Rs 102.7 crore were down 18%. This was a reflection of the persisting weakness in the company's operating performance, particularly with the September 2012 quarter operating profit margins weakening to 11% from 13.8% in the year-ago period.

The monolithic construction business, which till last year was the single largest segment, has been facing delays in payments from state governments. This has resulted in a long debtor recovery cycle and a stretched balance sheet.

The September '12 quarter results didn't offer any positive cue in this regard as well. "The company's working capital cycle, currently at 47% of annualised sales, has neither improved nor worsened from the last quarter.

So, the company is just stabilising and no improvement is in sight just yet," noted Jignesh Kamani, research analyst with brokerage firm Nirmal Bang.

Even the company acknowledges that the things are yet to turn around. The comments by Amit Patel, managing director of the company, accompanying the results press release, mentioned a time frame of "next couple of years" to achieve key financial targets and for bouncing back.

These key financial targets include improving return ratios, ensuring better working capital management and shrinking the overall size of the balance sheet.

The company's foreign currency convertible bonds (FCCBs) worth $225 million are coming up for repayment in March 2013 along with $66 million of premium. The company has over $100-million cash on its books, while the remaining funds will have to be raised through external commercial borrowings.

The company's proposed preferential warrant issue may raise around Rs 200 crore and reduce the borrowings marginally. Nevertheless, further equity dilution means profit share of retail shareholders will go down. This means that the time for investors to cheer is yet to come.